Understanding Credit & Debt
Getting a Tax Refund, Bonus or Cash Back? 4 Ways to Spend It
Be Thoughtful About Using Your Small Windfall
Expendable income. We all want it. But not all of us have it. There are times, however, when a small windfall comes our way. Whether it's a tax refund, a year's worth of cash back from your credit card, or a work bonus, those extra dollars and cents can be spent in many ways. Here are four to consider.
1. Invest It
For those among us fortunate enough to get a tax refund, deciding what to do with that cash is a big decision.
"We earmark it for a specific project so it doesn't trickle away with routine spending," says Mary Fetzer. “In the 20 years we've been in our home, our tax refund has helped us fund a 300-foot paved driveway, a stone campfire site for our backyard, and a fabulous roof for our too-sunny back deck, among other improvements."
If you're depending on your refund alone to bankroll any home improvement projects, you don't have to go big – update hardware or faucets, repaint a room or two, or freshen up your yard. Or, make improvements that may pay you back. Opting for a home energy audit can identify places in your home that could use insulation or sealing up, which, ultimately, will reduce the cost of your utilities for years.
(Also, if you're getting a large tax refund, you may want to consult a tax professional for advice on whether you're having the right amount withheld from your paycheck.)
2. Frugal Is as Frugal Does
Not every credit card has a cash-back rewards program attached, but those that do can be lucrative.
When she applied for one of her credit cards, Elaine Murawski had no idea it was a rewards card. But she decided to spend smartly once she realized she was earning cash back.
“I let the cash-back rewards grow, then I apply it to my bill, usually once a year," she says. Also consider applying that cash toward reducing any other debts you may have.
3. Save a Lot, Spend a Little
Sara Gundell and her husband of one year have their money ducks in a row.
“We tend to take the mostly practical approach. Whether it's a big tax refund or a small bonus from work, we put most into savings or toward needed purchases."
But they aren't such sticklers for financial discipline that they don't also have some fun.
"We try and balance between being responsible and living a little," says Gundell. “We got about $3,700 for our tax refund last year: $2,000 went immediately into our emergency savings and $1,000 went into a savings account that we plan to use for a new fridge and possibly a new dryer. We split the other $700 between the two of us for fun money. My husband bought a new rack for the top of his car and some new video games. I paid for an anniversary photo shoot and bought a couple of new dresses I've been wanting."
4. Live It Up
The worst part of any vacation is paying for it – especially after the fact. If you can plan far enough ahead, however, you can avoid racking up a hefty travel debt. When you get extra cash, sock it away in a separate savings account, and then add to it as you can. Then use it during your vacation.
To see how you might get cash coming back to you, explore the cash back rewards of Chase Freedom.
Illustration: Edel Rodriguez | Elizabeth Weiss McGolerick is a freelance writer and web content developer focusing on lifestyle and parenting topics. Her work has been featured on MSN, SheKnows, and AOL.